Consumer Class Action Settlements More Than Doubled from 2010 to 2013

Consumer class action settlements have steadily increased over the past four years, according to a new study released by NERA Economic Consulting, a global provider of independent economic advice and analysis in business, legal, and regulatory matters.

Consumer Class Action Settlements: 2010 – 2013: Settlements Increasing, With a Focus on Privacy analyzes settlements in consumer class actions based on a proprietary database created by NERA. These settlements were associated with a wide range of allegations, including consumer fraud, antitrust-related claims such as price fixing, false advertising, or product liability claims.

NERA identified 479 consumer class actions with either a preliminary or final settlement reached over the course of the 2010 to 2013 period. Of these, 321 cases had a reported settlement fund value. In 2013, NERA found 161 consumer class action settlements compared to 141 in 2012 and 66 in 2010.

Of the 321 cases with a reported settlement value, 84 percent included a monetary payment to plaintiffs as at least one component of the settlement. Only 26 percent of cases included a non-monetary payment, and only 6 percent included a donation to charity as a major component of the settlement.

Aggregate settlement values varied from year to year, ranging from $1.7 billion in 2010 to $9.7 billion in 2012. The average settlement value for consumer class actions during the four year period was $56.5 million. This figure was impacted by several large settlements including a $7.25 billion Visa/MasterCard settlement in 2012 and a $1.6 billion Toyota settlement in 2013. The median settlement for the 2010 to 2013 period was $9 million.

Privacy Violation Cases

Settlements related to cases in which plaintiffs alleged a violation of privacy increased from 2010 to 2013, with a total of 84 settlements being reached during this period. These cases fell into two categories: SPAM and improper handling of personal information.

Of the settlements related to alleged violations of consumer privacy, those in the retail, business/consumer services and entertainment/social media industries were more likely to be related to improper use of personal information. Settlements in the banking/finance and telecom industries were more likely to be related to SPAM than the improper use of personal information.

“We found that consumer privacy allegations varied by industry – in the retail, business/consumer services and entertainment/social media industries, settlements were likely to be related to improper use of personal information. In banking, finance and telecommunications industries, on the other hand, settlements were more likely to be related to SPAM. Both improper use of personal information cases and SPAM cases continue to be filed across industries, so it is likely this category of settlements will continue in the coming years,” said NERA Vice President Stephanie Plancich.

Key Trends in Consumer Class Action Settlements: 2010 – 2013

Nearly three-quarters of consumer class actions were settled in five states: California, Florida, Illinois, New Jersey, and New York. Approximately half of the settled cases were clustered in California.

The banking and finance sector had both the most cases settled and also roughly half of the aggregate settlement dollars reported over the 2010 to 2013 period. The average reported settlement value for consumer class actions brought against defendants in this industry was $151 million and the median settlement value was $10 million.

56 percent of total settlement dollars reported over the 2010 to 2013 period were related to antitrust cases.

12 percent of total settlement dollars reported over the 2010 to 1013 period were related to the motor vehicles industry. The average settlement value for cases brought against defendants in the motor vehicle industry was $247 million and the median was $45 million.

32 percent of settlements with an unreported settlement value were associated with allegations related to product liability, while only seven percent of settlements with a reported settlement value were related to cases with this type of allegation.

84 percent of cases with a reported settlement value included a monetary payment as at least one component of the settlement, compared to just 66 percent of cases for which the settlement value was unreported.

Source: NERA Economic Consulting